Yes, Google Is Trying To Take Over the WorldNext step: Take out Ma Bell.
Posted Friday, Nov. 16, 2007, at 2:33 PM ET
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StumbleUponWhat gives AT&T and Verizon real power over the wireless world? It is their control over spectrum, retail, and government, three areas where Google, as of now, is very weak, and where it must depend entirely on its allies. Spectrum is the one physically scarce resource in the wireless world, and those who control the airwaves have the power to call the shots by denying access to those who do not behave. That's why so much turns on the loyalty of Google's carrier partners, T-Mobile and Sprint, for they are serious players with spectrum. If, as is likely, AT&T and Verizon refuse to allow any Gphones on their networks, the reach of Android may be limited.
Nor is the problem of retailing Android phones trivial. Anyone with an Internet browser can use Google search or Gmail, but in the American mobile world the main barrier to market entry is reaching consumers. Today, more than 90 percent of Americans buy their wireless devices from their carriers. It is true, again, that Google has T-Mobile and Sprint provisionally on its side. But if only some outlets will sell a Gphone, fewer people will buy them.
Finally, the Bells are strong enough in Washington to try to use government as a tool against Google. The exact mechanisms can be hard for anyone but a seasoned telecommunications attorney to understand. But where there's a lobbyist, there's a way to make life difficult for a market entrant. Don't be surprised if Google's wireless division or Google itself begins to face new pressure from the FCC, antitrust authorities, or other sympathetic government bodies.
If these challenges sound daunting, they are. They explain why a once-radical company like Apple, when it launched the iPhone, bowed to the carriers instead of trying to fight them. But you'd also be crazy to underestimate Google and its incentives for waging this war. Unlike, say, book search, or some of Google's other stalled ventures, conquering wireless may very well be do or die, if the long-term future does indeed lie in mobile computing. And to the extent that Google is already a part of the broader war between open and closed systems, attacking the wireless world gives Google and its allies a chance to go on the offensive. It means that Google can spend less energy defending the Web from the Bells and cable companies in the ongoing struggle for net neutrality.
What Google has on its side is lots of money, smart employees, and some important allies. But most important is its conviction that it is on the side of history. Google believes that the ideology of openness must win out, and that the Bell system will collapse under its own contradictions. For a firm, Google has an astonishing sense of its manifest destiny. As one Google executive told me recently, "We don't do something unless we are convinced we will do it an order of magnitude better."
That's why it must be understood that Android is just an initial step. Next, Google or its partners must do whatever they must to get their hands on more spectrum to establish a beachhead of true openness in the wireless world. Provided Google continues to have the nerve and resources, we'll likely remember the Android announcement as the beginning of a long, drawn-out battle for ideological supremacy in the world of wireless.
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Remarks from the Fray:
Corporations are not like people, with hard-wired personality characteristics. Verizon and AT&T are protean economic creatures, and over the long run they will act to serve their shareholders' interests. Come to think of it, so will Google.
Is such corporate self-interest a good thing or a bad thing? The premise of our economic system is that it's usually, though not always, a good thing. Antitrust law does a pretty good job of identifying the narrow circumstances in which unbridled market forces disserve consumer interests. But one will search in vain through the Wu corpus for an economically rigorous analysis of what antitrust theory says about his "openness" rhetoric, This article is no exception.
As for "control over spectrum," AT&T and Verizon have most (not all) of their spectrum because they paid billions for it at auction. The same for Sprint and T-Mobile. Google can do it too, in the new spectrum auction the FCC has planned for next year.
As for "control over retail," sure, the telcos have lots of customers, but Google has tens of millions more than either AT&T or Verizon, because it completely dominates the national search market, with a market share of 70-90%.
Finally, as for "control over government," Google is the darling of the Democratic high-tech intelligentsia, which will be running regulatory policy in fifteen months. (Where did Barack Obama give his recent speech extolling the substance of Google's regulatory policy? At Google headquarters. Clinton visited a few months ago.) But Google needn't actually wait for a formal change of administration, because its side has formidable political clout already.
What Google should fear most is a government that is temperamentally quick to impose new "neutrality" or "openness" obligations on large companies. Do you like the idea of "net neutrality?" You'll love "search neutrality." After all, Google, with its $200 billion market cap, controls the search market, and its proprietary algorithms ultimately pick the winners and losers on the Internet. Want to know how those algorithms work, and which websites they favor or disfavor? Want to create an FCC or FTC regulatory staff with responsibility for ensuring that Google treats Web participants openly and fairly? Follow the "neutrality" and "openness" rhetoric where it logically leads.
--sceptic
(To reply, click here.)
We should hope they are successful. The incumbent phone companies have no interest in satisfied customers. Wireless voice quality is horrible. Internet connection speeds are pitiful. Prices for service are outrageous. they tap your conversations , email, and web surfing, and provide that information to the government, no questions asked. What other utility in the U.S. requires a 2-yr contract, besides wireless phone service (even if you don't buy a subsidized phone, they still want a 1-yr contract for some services)?
Most wireless phone calls are made inside a building (well, probably more than half, if not 75% of them). A lot of those buildings have wi-fi in them. If google specs out a phone that can make VoIP phone calls, it can offer a wi-fi based phone service. They have lots of fiber bandwidth, they know how to use computers, and they have lots of capital. Plus, they are infinitely smarter than the phone companies. The only disadvantage they have is that they don't seem to be as willing to bribe congressmen yet. While a wi-fi based service won't be enough to take over the wireless phone business, it will put a dent in the carrier's revenue. And given how little they understand technology, it will be a while before they realize it, and will then have to make a deal for access to their network. Since t-mobile is already offering free phone calls over wifi (if you have their standard wireless service), this may not be such a stretch.
--kgsbca
(To reply, click here.)
(11/18)